According to the Manufacturers Association of Nigeria (MAN), the depreciation in value of the Naira reduces manufacturing production, as observed in the various foreign exchange crises, adding that high cost of import bill for the productive inputs decreases working capital and feeds into commodities prices, thereby making the sector less competitive.
The local producers explained that the forex crisis in which Naira value depreciates among convertible currencies such as the US dollar, strangulates and reduces the size of manufacturing in the country, while continued Naira value depreciation causes manufacturing raw-materials and machinery imports to be more expensive.
On Monday, the exchange rate at the parallel market closed at N480/$1, leaving a N100 differential between the official Central Bank of Nigeria (CBN) rate.
Dollar liquidity dried up in Africa’s biggest crude producer after oil prices plunged following the coronavirus pandemic. Crude exports account for about 90% of foreign exchange earnings in the West African nation. Authorities devalued the local unit twice last year to deal with the pressure even as the economy contracted in the third quarter.
To streamline forex supply and ensure there is enough to meet rising demand, the CBN moved to ensure strict monetary control of the forex market, threatening to expel exporters who refuse to remit foreign exchange proceeds in the NAFEX market. It also warned against paying diaspora remittances in naira.
-ABOKI (FX)